Kleptocrat’s Club – the NH Business Finance Authority

[Lloyd Danforth]

by Bill Walker

Previously by Bill Walker: Stopping the Next Hitler

Monarchy is an endangered species. Once the only form of government, it is now gone except in a few countries where it is kept alive for sentimental reasons with US mercenaries and drones (e.g. Kuwait and Saudi Arabia). Republican government is also extinct for all practical purposes, being confined to Switzerland's cantons and a few micronations. The most common form of government today is the Kleptocracy – rule by those who control the means of currency creation.

The US is a Kleptocracy, and has been since before World War One. Who cares who their Congressman is, or which party controls the Presidency? Most people can't even name their Federal Senators or representative, let alone the state-level officeholders. But everyone knows Ben Bernanke's name, because he's the guy who MCs the most popular game show: Who Gets to be a Billionaire?

Once the US was a place where people became wealthy by producing a new and better product or service. Vanderbilt, Carnegie, Henry Ford, all created new wealth and made others better off in the process. Even after the Kleptocracy was founded, some entrepreneurs managed to continue the tradition of "insanely great products": Wozniak, Jobs, Bezos, and the other computer whiz kids.

In the 21st century, starting a business in the United States is a loser's game. First a corporation must risk its capital with no guarantee against loss. If the business survives and manages to create something more valuable than the resources it consumed to make it, then most of the gains are taken by government. A corporation pays 35% in Federal tax, then pays state income tax. Then the investors pay 15% income taxes on their dividends, and capital gains taxes on the nominal "increase" in value of their shares... not adjusted for inflation. And if the investors actually try to USE "their" money inside the US, they are then taxed again with sales, property, and/or excise taxes. Correcting for the possibility of investment losses, the investor gets far less than half of the value that she created with her investment.

The Obama Administration is trying to increase the double taxation by taxing dividends at the full (39%) rate of ordinary income. (By comparison, "communist" China only taxes corporate income at 25% and dividends at 10%). This of course, is only for those losers like you and I, those not a member of the Kleptocrat's Club.

For members of the Club, life is a continuous success story. It doesn't matter whether your products are terrible (GM) or even imaginary (Goldman Sachs). All that matters is the continuing flow of freshly printed money into your business. It's like being a medieval noble; you can do no wrong. The courts will always find in your favor, you are never subject to the humiliations of peasants (airport security, police raids, etc.) All that you need is a little modification of language: "counterfeiting" becomes "quantitative easing", "theft" becomes "stimulus", and so on. After enough repetition, the peasants will believe that your wealth causes the Sun to rise in the morning, and that they must thank you for allowing them to pay for your palaces and the subsidies for your unprofitable businesses.

So the goal of modern social climbers is to become part of the Club. If you can't arrange to be born into the families that control access to the national Club, you can still have a consolation prize: you can start a state-level business subsidy office. There are hundreds of these humble little state-level kleptocrat clubs around the US. Some are called "economic development zones", some are called by various department names. Today we'll take a quick look at the New Hampshire Business Finance Authority.

Kleptocracy in the "Live Free or Die" State

The NH BFA has the distinction of being more secret than the NSA. There isn't even a Wikipedia article on the Business Finance Authority. Nor are any of its financial statements online. I had to make a 91-A request to obtain its annual reports to the governor. As the state refuses to put the annual reports online, the NH Liberty Alliance will soon have them on its website, in our continuing struggle for transparency.

So there won't be any links in this article. If you want to check my figures, just email the director, good old Jack Donovan jackd@nhbfa.com. If that doesn't work, go over and pound on the door at 2 Pillsbury Street Suite 201 Concord, NH 03301. (603) 415-0190. The staff loves to hear from the ordinary people that pay their salaries.

According to the first page of the 2011 Annual Report, the BFA has transferred over 1.4 billion dollars from we lazy, undeserving taxpayers (and all holders of dollar balances) to those who truly earned the money (by filling out BFA forms). The BFA states that it has "helped" 4,375 businesses since 1992. I'm sure that is true. Unfortunately, the report fails to mention that the BFA HARMED all the other businesses and workers in the state, by granting and/or diverting money to the politically favored.

Lucky Winners:

Anheuser-Busch, 12 million dollars, in 2011. Anheuser-Busch is actually owned by InBev, a Belgian-Brazilian beer conglomerate which bought the Clydesdales for $52 billion in 2008. Obviously, this is a company which needs to be subsidized by NH state government. Otherwise Granite Staters might have to drink Sam Adams or some local microbrew that actually tastes like something.

Lonza, the Swiss biotech company, $35 million in 2011, $25 million in 2006, $30 million in 2003.

Waste Management, the garbage giant: $20 million in 2001, 20 in 2002, 15 more in 2004.

Sig Arms, makers of fine pistols (except for early model P238s), got $1.75 million in 2003.

But the BFA doesn't just help big business. It also helps upper-crust schools and government media outlets.

Kimball Union, a private school that charges over $46,000 per year per student, got over a million in 2001. This is a critically important use for money that might otherwise be wasted on less important children in the other private schools around the state, most of whom charge less than 12K per year.

Seacoast United Soccer got 3.7 million.

NH "Public" Radio got $6 million dollars in 2008 to help fund its mission to elect more Democrats in New Hampshire.

And speaking of Democrats, the BFA bought some Pennsylvania company a nice NH newspaper, the Claremont Eagle Times. It was reported at the time as costing only $187,000, but the annual report (which, remember, is not online) shows it as 250K. The town of Claremont voted for Ron Paul in the NH primary, but you'd be hard pressed to find any signs of Ron Paul supporters in the Eagle Times.

Reverse Robin Hoods Gone Wild

So "business" has become a euphemism for robbery, as are the words "bond" and "loan guarantee". The Business Finance Authority doesn't show up as a line item on the NH state budget. It does give out some direct freebies, like weatherization grants. But mostly it works in the shadows, by "guaranteeing" bonds, and/or granting the right to certain corporations to issue tax-exempt bonds. Being tax-exempt "lowers the cost of financing", the BFA helpfully explains in its reports (apparently the wealthy recipients would not be clear on this otherwise). Overall, so far the BFA gave out $399 million in loan guarantees, and $1.008 billion dollars in tax-exempt or other subsidized bonds.

The BFA has long lists of "impacts"; numbers of jobs created, number of jobs preserved, how many "Local Development Organization Loan Pools" they funded. Mr. Donovan, the director, was very concerned that I might ask him for the figures on the "loan loss rate". He needn't have worried. The "loss rate" on any government program to steal from one business to give to another is always 100%. Once business becomes robbery, everything is lost: honor, trust, your soul, etc.

New Hampshire has fewer business subsidies than most states. There are hundreds of euphemistically named subsidy organizations, large and small, around the US. Taken together, they have taken "business" more than halfway from being the engine of human life to just another parasitic scam.

Am I saying that businesses shouldn't take subsidy money? No. Once your opponent picks up a knife, the game of chess is over and you have to play by knife-fight rules too. I'm saying that all our political efforts have to go into exposing, then eliminating all subsidy programs and prosecuting their perpetrators. Supporting business subsidies as policy doesn't make you a "good Republican"; it makes you a thief.

[Pat K]

That there Bill guy,HE'S GOOD.

[WithoutAPaddle]

I just Googled a unique, five word string from this article and didn't find it hosted anywhere. If Mr. Walker or any of his adherents want this content circulated, they will have to arrange to get it into a network that is Googleable (my spellcheck doesn't include Goobleable or Googlable, but then, it doesn't even include Google, or spellcheck, for that matter).

I have never read of the term Kleptocracy linked to the "printing of money" and see nothing in this article that makes that connection. Kleptocracies are governments that siphon off resources to benefit those controlling the government, with no legal justification for doing so, with no means for the public to account for those transfers, and with no means for the citizenry to do anything about it if they did. That money can come from extraction or harvesting of resources (like the aforementioned Saudi Arabia and Kuwait), from taking bribes for empowering monopolies of legal enterprises (telecommunications in Russia, import/export licensing anywhere that has a port) and illegal ones (See: Narcokleptocracy, in its various spellings). There are a few African governments that have done such a poor job of managing their mineral extraction monopolies that they have also had to print funny money to make ends meet, but that has not been the case in the United States. We don't have an inflation problem in the United States, as evidenced by the fact that our consumer interest rates are at record lows.

Tax rates in the 20th century were significantly increased during the great depression and peaked near the end of World War II, but more businesses were created and successfully operated at those higher rates than have been since the tax rate trend reversed, starting in the 1980s.

Where did New Hampshire get the money it gave to Anheuser-Busch, Lonza, Waste Management, etc? It surely didn't print it. And how are these club-member recipients exempted or excused from double taxation. Aren't they taxable corporations?

The issue of secret or unaccountable government grants to private interests is troubling to me. Starting in, I think, the 1970s, governments "privatized" the performance of a lot of its duties under the pretense that doing so would be more efficient than having the government continue to perform them. I have always been very skeptical about the efficiency of such contracting, but even if the costs of privatizing janitorial services or toll booth collections are anywhere near comparable to the cost of having the government hire employees to perform those duties, I suspect that the private employers basically make a larger portion of the total budget for management and ownership, and give less in the way of benefits to their employees... or to their "sub contractors", since they can abuse them even more in that capacity. I'd rather give our state toll booth attendant jobs with health insurance and worker's comp and some degree of job security than contract that service out for the same average cost to companies that call their attendants subcontractors and whose owners and managers can therefore pocket the difference in labor cost for themselves.

The impetus to states to subsidize the creation of enterprise zones is to better poach companies that can be conveniently located in lots of different places. That aspect of attracting new businesses is a zero sum game, and it reeks of favoritism, since, when one applies for such a subsidy, as the saying goes, if no one sent you, then no one wants you. Back in the early 1980s, I knew a few people who had the "pull" to land social services contracts for their own agencies that existed solely for their own personal enrichment. One common way to favorably present a proposal to Health and Human Services is to get a crony at another agency to agree that Agency A can tell Health and Human Services that agency B has agreed to match a grant that they might get from the state, and so they can claim that they are "multiplying their grant", but the money that agency B would use to match it already came from Health and Human Services, so there is no net income gain, but an increase in management and oversight expenses.

[Free libertarian]

That there Bill guy,HE'S GOOD.

I second the motion.